Poste Italiane reduced its mail & parcel losses last year thanks to strong e-commerce growth, is speeding up deliveries and aims to double B2C parcel volumes by 2022, according to senior executives.
The Italian postal group increased overall consolidated revenues by 2.2% to €10.9 billion in 2018, reduced costs by 1.5% and improved operating profits (EBIT) by 33% to €1.5 billion on better results from all business units.
CEO Matteo Del Fante said: “Poste Italiane met all 2018 financial targets both at group and segment level thanks to a strong progression of underlying operating profit, driven by steady revenue growth, reduced reliance on capital gains and cost discipline. Our performance in 2018 demonstrates improved operating leverage, where increased revenues supported by cost efficiencies translated into EBIT progression.”
The cash cows remained Financial Services, whose EBIT rose by a third to €859 million as revenues increased by 4% to €5.2 billion, and Insurance Services, which improved operating profits by 8% to €866 million on slightly higher revenues of nearly €1.5 billion. The high-margin Payments, Mobile & Digital unit increased revenues by 11% to €592 million while EBIT was up 5% at €204 million.
The loss-making Mail, Parcel & Distribution unit reduced its operating deficit by 17% to €430 million as external revenues dropped by 1.4% to €3,580 million. This was the result of B2C parcel growth and a better than expected mail performance, supported by successful implementation of Joint Delivery Model and continuing network transformation, according to the group.
Parcel revenues grew by 10% to €761 million, with B2C revenues up 28% at €301 million. Volumes increased by 12.6% to 127 million parcels, including a 27% rise in B2C parcels to 74 million and a moderate 7% rise in B2B parcels to 31 million. In contrast, mail revenues dropped 3% on a 5.5% fall in volumes.
Del Fante highlighted the unit’s progress last year towards the Deliver 2022 targets by launching the Joint Delivery operational model for letter and parcel deliveries and by capitalising on the rapid development of e-commerce in Italy, including the extension of the PuntoPoste parcel collection points through a distribution agreement with the Italian Federation of Tobacco Shops and the roll-out of parcel lockers.
This year the Mail, Parcel and Distribution segment revenues are expected to fall by 1%, with a 12% rise in parcel revenues largely offsetting the ongoing mail decline (-3% y/y), and the operating loss should be further reduced to €300 million.
“In 2019 the Mail, Parcel and Distribution Strategic Business Unit will be engaged in completing implementation of the new Joint Delivery Model through the reorganisation of 405 more delivery areas (in addition to the 350 reorganised in 2018) and completing the transformation of mail and parcel sorting capacity with the aim of boosting efficiency and quality of the process. The Group is also introducing alternative electric delivery vehicles (3-wheeled vehicles) to improve safety and adopt eco-friendly forms of transportation,” Poste said.
Speaking at a Capital Markets Day in London yesterday, the CEO told analysts that the Italian parcel market revenues are expected to increase by 5.2% by 2022 while mail market revenues are likely to fall by 4.7%. Poste Italiane aims to increase its B2C market share from 33% in 2017 to 40% in 2022.
Going into more detail on the 2022 targets, Massimo Rosini, head of Mail & Parcels, said the division aims to keep overall turnover stable at €3.5 billion. B2C parcel revenues should grow by 21% a year on average to reach €600 million, while volumes should double from 74 million last year to 150 million in 2022.
Among commercial moves, the company plans to increase the number of alternative delivery points from just 420 to 3,500 this year and up to 8,000 in four years’ time. More delivery options will be introduced and city logistics solutions will be piloted this year.
Operationally, Poste Italiane will use air transportation more than in the past in order to speed up deliveries, especially to southern Italy and the islands. New sorting centres with automated sorting systems will be opened, including a hub in Bologna this year, while the volume of parcels delivered by mail staff will double to 100 million parcels as the joint delivery model is expanded across the country.
